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6 Mar, 2008 23:31

Alternative investment market goes `crazy`

As the U.S. currency weakens and global equity markets are shivering, alternative investments are gaining attention – especially for those who like to invest in something tangible.

Auction house ‘Kabinet’ co-owner Konstantin Zhuromsky says average prices for old Russian coins, medals and war objects jump in price with every sale. He says these numismatic objects embody a rich period of Russian history that ended with the 1917 October Revolution.

The artifacts are unique and irreplaceable and the demand is growing.

“What drives interest high is our country’s history – brutal and full or wars. Many businessmen have come from military families. Collecting numismatics has become their intellectual hobby, as well as win-win investing,” Zhuromsky said.

With prices having gone up so much in the past few months, auctioneers describe the market as “crazy”.

Market favourites include art and wine. The main index on Liv-ex, an independent trading platform for the fine wine trade, gained more than 40 per cent last year – the FTSE blue-chip index managed only a tenth of that.

But some investment advisers say the example is no guide to the future – and certainly not for everyone.

“This market is not for the rich, it’s only for the super rich. I advise those investors who haven’t covered their financial needs yet, and the needs of their kids, to forget about alternative investments,” said Andrey Kochetkov, INFIS Vice-President.

According to Andrey Kochetkov, the art market on occasion sees thousand per cent profits when, for example, the price for a painting may rocket if a talented young artist dies.

On average, American indicators show the art market grows at the same rate as the equity market. But the additional expenses of tangible trading may offset even those profits.

“The share is simply a digital sign on your account which costs you nothing to keep. If you buy an expensive painting, you will have to pay for sophisticated storage, for its security, for the insurance. Taking everything into account, you’ll see it’s not such an attractive investment,” Kochetkov explained.

Experts say that alternative investments are higher risks and less liquid than traditional ones. Although, if you already have extra cash and a passion for collecting something, you may find that careful buying can earn you a tidy return.

But if your fine wine fails to go up in value, you should be able to afford to just drink it.